Upstart Designers Make Fashion in their Own Image

One hallmark of newfound wealth in the developing world has been the embrace of Western luxury labels. But since the global economy fell apart last fall, the moneyed classes in India, the Middle East, China, Brazil and Russia have cooled their spending on quilted Chanel handbags and Gucci shoes.

That doesn't mean they've given up luxury fashion altogether. They are turning to smaller, local designers who are using the market downturn to incubate homegrown premium brands and compete with Armani and Bottega Veneta by providing high-quality luxury products at a fraction of the price. In India, the crisis has translated into an unexpected opportunity for Manish Arora and Rajesh Pratap Singh, two of the country's most talented designers. Both translate aspects of Indian culture and taste into unique contemporary collections, fusing Indian color sense and embroidery with rigorous Western tailoring. Their pieces have global appeal but also speak specifically to Indian customers. For as little as $350, Indian shoppers can purchase a dress at either designer's flagship store in Mumbai, indulging their inner fashionistas without feeling guilty. "Indian designers have been sensitive to market conditions and have adjusted both their product and prices, allowing customers to have a sense of getting a good bargain even at the top end," says luxury retail consultant Sabina Chopra.

Chinese designers Guo Pei and Wu Yong are also winning new fans at home—despite their high price tags. Their work isn't overtly Chinese; most upscale Chinese consumers are more interested in Western silhouettes. Pei and Yong create melodramatic fantasy gowns, ranging in price from about $4,300 to upwards of $43,000, that incorporate shredded chiffon, ombre-dyed fringe and oversize hoop skirts as well as hints of Eastern influence. Guo Pei CEO Jack Pao Chieh Tsao reports that despite the downturn, the company's revenue grew 25 percent in '08, and he anticipates 20 percent growth this year, thanks exclusively to domestic sales.

In Lebanon, Georges Hobeika's atelier turns out elaborately embroidered gowns with prices that run as low as $15,000 (compared with $200,000 for some French couture gowns). Last year sales grew 20 percent in Lebanon, despite increased production costs and the collapse in oil prices—a major factor in regional wealth.

Brazilian designers like Ronaldo Fraga and Oskar Metsavaht are less interested in classic luxury than in channeling their folk heritage, laidback beach culture and impressive handicraft tradition into a "low to high" look. Metsavaht's line, Osklen, presents an upscale version of the Carioca surfer and skater culture via relaxed cuts in a mixture of casual and luxe fabrics—such as a cotton sweater elaborately beaded with metal studs. Fraga's artsy, airy creations feature vibrant prints and rustic hand embroidery. Their sophisticated and sentimental look obviously resonates in the region; while sales in São Paulo's chic international boutiques suffer, Osklen enjoyed 24 percent growth in the first quarter of 2009.

These markets all share certain traits: cheap, highly skilled handicraft labor; interest in exuberant color and embellishment; and a new class of mega-rich still discovering the pleasures of conspicuous consumption. Their consumers are delighted to buy a statement piece by one of their own designers for a third of the price of a comparable Western creation. It goes beyond savings; there's an element of pride at work, too. No longer content to simply contribute cheap labor for Western baubles, they're developing luxury in their own image. This sense of empowerment is the start of a shift that promises to transform the luxury business into a truly globalized marketplace. Today, Western brands are learning to coexist with local brands in foreign markets. Tomorrow, they're likely to face serious competition from these upstarts on their home turf of London, Milan, Paris or New York.

Bricks-and-mortar luxury retailers are having a hard time attracting window-shoppers these days, let alone willing buyers. But luxury e-commerce retailers are having no such trouble.

Founded in 1998, was one of premium e-tail's pioneers, presenting itself as a well-curated catalog of more than 350 labels, discounted up to 80 percent. promotes shopping as competitive sport, dedicating its site to auctions of vintage luxury items. Bidders vie against each other for everything from Hermès Birkin bags to Cartier watches. Two newer sites, and, model themselves on the showroom sample sale, curating single-designer clearance events that offer consumers edgy, runway-style merchandise—at up to 70 percent off. Both companies have delivered stellar results: after debuting in late 2007, Gilt saw 2008 revenue of $10 million, while Vente-Privee grew 46 percent from 2007 to 2008, to approximately $877 million. It's not uncommon for merchandise, bearing coveted labels like Louboutin and McCartney, to sell out in minutes. No department store could claim that.